After a quick double in price last week
Cypress Biosciences
(NDAQ:CYPB) is again in the news after Black Horse Capital Advisors
disclosed a 1.2 million share stake and said it opposed the company's
plan to sell 4.7 million shares of stock in a public offering and urged
the company to consider adopting a share buyback plan instead.
The
activist hedge fund said it was pleased with the company's very
successful Phase III results Milnacipran in Fibromyalgia Syndrome and
suggested that the drug should provide the company with substantial
revenues in the future. However, the company now has too much cash -
specifically, $100 million in cash with no debt and a low cash burn
rate. Combine this with a successful late stage drug and it is
difficult to see why the company would need to issue more shares to
raise money!
What does this mean for investors? Well, a large
scale share buyback combined with the avoidance of issuing any new
shares would likely increase the company's share price and reward
investors with cash that is simply being unused right now. And Black
Horse also hinted that if these demands are not followed they may
consider other options available to them as large shareholders -
presumably a proxy fight. Combined, these factors make CYPB a stock
worth watching!
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